Sears seems to be preparing to file for bankruptcy, sources told CNBC Wednesday, appearing to be another knock against a company that was once the world’s largest retailer.
The sources told the network that CEO Eddie Lampert had struggled to keep the retailer going as Sears repeatedly closed stores and sold off assets in a failed effort to return to profitability.
According to the sources, Sears Holdings has reached out to banks in hopes of securing financing to file for the bankruptcy, per CNBC . News of the possible filing sent the company’s stock tumbling 32 percent — to 40 cents per share — in premarket trading, the network stated.
The Wall Street Journal said that 10 years ago, Sears stock was trading as high as $144 a share.
The loan Sears is reportedly seeking, called a “debtor-in-possession” loan, is meant to make sure that a business has enough money on hand to keep it running through the bankruptcy process, CNBC stated.
Lampert’s hedge fund, ESL Investments, had asked for a restructuring where it would purchase some of Sears’ remaining key assets, CNBC noted. Lampert has a controlling ownership stake in Sears, some 31 percent of the retailer’s shares outstanding.
CNBC stated that ESL Investments owns another 19 percent, meaning that Lampert essentially holds half of the remaining company.
Sources told The Wall Street Journal that Lampert had wanted to restructure Sears’s debt without filing for bankruptcy protection because he believed that the process was riskier for retailers.
The newspaper said that many retailers hope to restructure in bankruptcy but end up liquidating, such as Toys “R” Us earlier this year, per the source.
Analysts have said, according ton CNBC , that Sears would need to make more than $1 billion a year to keep running — with less than 900 stores still open in the U.S. today, and under 90,000 employees.
The Wall Street Journal reported on Tuesday that Sears Holding hired M-III Partners LLC, an advisory firm, to help lead it through the bankruptcy filing which could come this week. Sources told the newspaper that Sears wanted to file to beat a debt payment deadline.
The Wall Street Journal said that debt payment totaled $134 million. Sources said that M-III Partner officials had traveled to suburban Chicago to work on the potential bankruptcy filing with Sears.
The retailer had compiled more than $11 billion in cumulative losses over the past seven years — while its yearly sales have tumbled nearly 60 percent over the same time to $16.7 billion, the newspaper reported.